If you plan to start an online business
, there are many things that you need to consider. What your profits will look like, product acquisition, marketing, etc., are all important. However, one question many people have is whether they need to register their businesses to sell online.
So, do I need to register a business to sell online?
The simple answer is yes; you will have to register a business to sell online and obtain a business license. However, the type of registration and business license needed will depend on your circumstances.
So first, let's look at the issue of registering a business and obtaining a business license.
Do I Need to Register a Business to Sell Online?
Yes—you need to register your business and apply for a business license to sell online.
You are not allowed to operate an online business without registration and proper licensing, although it may differ from one state to another.
If you do not have the proper licensing and documentation, you may face legal and financial repercussions.
What is a Business License or Registration?
In simplest terms, registering your business and obtaining a business license gives you permission to run your business. This document may be physical or virtual.
The simple purpose of a business license or business registration is to show that your company has government approval to operate legally.
Do You Need a Business License to Sell Online If You Already Have a Physical Store?
The distinction between licensing brick-and-mortar and online stores is essential to understand. If you are starting a brand-new online store, you must register your business and get a license.
However, if you already have a brick-and-mortar store, you probably won't have to because you should already have that registration and business license.
The government wants you to pay the taxes you are responsible for. Your business license will include your whole business, whether online, brick and mortar or both.
If you already have a physical store and want to add an online retail component, your existing registration and license should be enough.
How to Register a Business in the US
If you want to register your business in the US, follow the steps below. Remember, you first need to register your business federally and on a state level.
1. You will first need to choose your business structure. This could take the form of a sole proprietorship, a partnership, a limited liability corporation, or a C-Corp. The one you choose should consider the size of your entity and how finances are handled.
2. The second step is to select the location you want to register your business in; this is the address you will use to file your taxes.
3. The next step will be to register your business name. This is a general part of the process, especially if you have a corporation. However, you will need a DBA license if you're operating your business as a sole proprietorship or partnership, and it's not under your own name.
4. The next step is registering with the Internal Revenue Service, as you will need an employer identification number (EIN).
5. You will need to contact your state and local government revenue offices to register your business with the state or county. The above steps have been for federal registration, whereas this is for state registration.
6. The last part is applying for and getting the necessary licenses and permits, discussed below.
Six Types of Licenses and Business Permits
Although you may not need to get all six types of business licenses and permits, some may apply. So, you should know these six business permits and licenses and ensure you have the proper paperwork to legally operate your business.
1. A General Business License
The first is a business or a general license. This might also be referred to as a business operating license. This license gives you permission to run a company in a location, which could be your state, county, or city.
Every business will need a business license to operate legally. However, obtaining one and the cost will depend on where you live. Moreover, business licenses need to be renewed regularly.
2. A Seller's Permit
A seller's permit is needed if you sell products that are considered tax worthy. Whether you have an online store, a physical store, or both, this is the case.
A seller's permit will allow you to collect sales tax, which you pay to the government.
Whether you need a seller's permit will depend on the products you are selling and the state in which you live.
3. A Sales Tax License
If you plan to sell anything online, you must have a sales tax license as you will be paying this to the government. This is a requirement, and you will face fines and other repercussions if you fail to get a sales tax license. This differs from one state to another, so you'll need to do your research.
4. An EIN
An EIN is an employer identification number that identifies you as a business. You could equate this to a Social Security number for a business. It allows you to stay compliant with regulations and tax laws.
Unless you are registered as a sole proprietorship, you will need to get an EIN, especially if you incorporate your business. This will allow you to get a business bank account.
5. A DBA
A DBA is also known as a "doing business as" license. When you register your business with the state, you also register your business name. However, not all business types are required to register their business name.
This applies to general partnerships and sole proprietorships. If this is the case, the legal name will be your business name.
If you'd prefer not to operate the business under your own name, or if you want to run the business under a name that you didn't use when registering with the state, you will need a DBA license.
6. A Home Occupation Permit
If you are selling online, you may be selling from home. In most places in the US, you will need a home occupation permit that allows you to operate a business from home. This will also differ from one state to another, so do your research.
The bottom line is that you need to register your business to sell online, and you also need to get all the appropriate licenses and permits. This is the case at the federal and state level.
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